Correlation Between Western Acquisition and Sandstorm Gold

Can any of the company-specific risk be diversified away by investing in both Western Acquisition and Sandstorm Gold at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Western Acquisition and Sandstorm Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Acquisition Ventures and Sandstorm Gold Ltd, you can compare the effects of market volatilities on Western Acquisition and Sandstorm Gold and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Western Acquisition with a short position of Sandstorm Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Acquisition and Sandstorm Gold.

Diversification Opportunities for Western Acquisition and Sandstorm Gold

0.25

Correlation Coefficient

Western Acquisition  Sandstorm Gold

Modest diversification

The 3 months correlation between Western and Sandstorm is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Western Acquisition is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Western Acquisition Ventures are associated (or correlated) with Sandstorm Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandstorm Gold has no effect on the direction of Western Acquisition i.e., Western Acquisition and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Western Acquisition and Sandstorm Gold

Given the investment horizon of 90 days Western Acquisition Ventures is expected to generate 0.85 times more return on investment than Sandstorm Gold. However, Western Acquisition Ventures is 1.18 times less risky than Sandstorm Gold. It trades about 0.05 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about 0.03 per unit of risk. If you would invest  1,038  in Western Acquisition Ventures on September 2, 2024 and sell it today you would earn a total of  54.00  from holding Western Acquisition Ventures or generate 5.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Western Acquisition Ventures  vs.  Sandstorm Gold Ltd

Western Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Sandstorm Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sandstorm Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Acquisition and Sandstorm Gold

The main advantage of trading using opposite Western Acquisition and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Acquisition position performs unexpectedly, Sandstorm Gold can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sandstorm Gold will offset losses from the drop in Sandstorm Gold's long position.

The idea behind Western Acquisition Ventures and Sandstorm Gold Ltd pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.